In response to requests from Plumbing Manufacturers Intl. (PMI) and its members, as well as from other supporters of the U.S....
Preparing your business for success after retirement
Outside of the certification training we do, there are usually two main reasons Moti-Vitality’s clients call us for help with their sales or management teams. The first, and maybe the most frustrating, reason is they have an existing sales team (often including a family member) with which they are hoping we can perform miracles. Unfortunately, existing salespeople already know everything—according to themselves, at least—and our abilities to break habits and institute real change are limited, especially if the owner is unwilling to put accountability programs in place. We have learned to decline these opportunities or enter into them with specific goals and expectations.
The second reason is far more exciting to us: owners who are looking at a retirement plan that includes either turning the company over to someone they trust or selling the company to another party. Either way, they are looking to make the dealership profitable enough to allow them to retire and live comfortably. There are libraries full of books on this topic and many professionals more knowledgeable than me, but I do have a few suggestions to help prepare for that transition.
Most of our clients are small dealerships. They usually are run by second- or even third-generation owners who have grown up in the business. They are intelligent people with an incredible work ethic, but they often did not extend their academic experience beyond high school. They started out as a teenagers delivering salt for their dads’ companies and, through the years, moved up the ladder until one day, they found themselves wearing the dozens of hats an owner has to fit upon his head. They are also often the only person doing sales calls.
Many of our clients have never had a true sales department. Often, individuals approached the owners with promises they could sell like crazy or manage a sales team, but those efforts to create a sales program showed meager results at best and ended with customer complaints, wasted brochures and business cards, and maybe even a stolen test kit. These experiences tend to leave a bitter taste in the mouths of employees who have helped grow and sustain a dealership.
Many traditional salespeople work for the sales and the commission that comes from them. They are the “yuk-yuk,” back-slapping, pushy sales personality that most of us cannot stand buying from. These individuals never are going to integrate into a company that has built its business on serving and helping customers.
Sales departments are necessary if the company intends to grow to a level that will allow an owner to retire with a decent income. It is possible to hire sales professionals who understand that sales should be more about giving than taking. If no sales department currently exists, then creating a new one from scratch that fits with the existing business model and philosophy is much easier and has a greater chance of producing revenue and happy customers.
A rental program can provide strong residual income that will continue to grow if it is built and managed properly. This can help provide a more consistent income to an owner during retirement or make the business more valuable to a potential buyer. Rental programs cannot be made overnight, though. The up-front inventory can get expensive, and it takes about three years after installation for a piece of equipment to produce a monthly profit. Set a goal to increase your rental customers by five per month, and after five years, you will see significant revenue growth.
In the December 2016 issue of WQP, I wrote a horribly depressing, but true, article called “Succession Planning for Dealers.” In it, I recounted a worst-case scenario that happened with one of our clients when he passed away without any kind of plan for what would happen to his company and assets. The result was an ongoing court battle and people the owner cared for fighting with each other.
Hopefully, a successful retirement plan will help with the succession plan as well. Before retiring, figure out which roles everyone will play, including yourself. The question of how much authority or involvement you want to have needs to be realistically answered if you want your company to remain successful after you retire.
I get that it may be tough to turn the reins over to a new driver, but if that is what you are going to do, then I would seriously suggest doing it. On the other hand, if you want to still have some decision-making authority, that is OK too. Just be upfront and honest about it with the person to whom you are handing over responsibility. I have seen several owners say they wanted to back away from the business and let a general manager run things when what they really meant was they did not want to do sales in the evening or weekend anymore, but still wanted to be the boss. If the person you want to take over is someone you trust, it will be easier, so do your homework. And remember, just because he or she may want to do something differently than you would have done does not mean it is a bad idea. Also, as hard as it is to admit, just because someone is related to you does not mean he or she is be the best person to run your business.
Of course, if you are selling the business, these things will have to be determined before the sale is made. Be prepared to watch what you have bled and cried over turn into something entirely different from what you built from scratch.
Obviously, there are many things that need to be done in preparation for retirement. But if planned thoroughly and properly, there is no reason an owner should not be able to harvest the crop that has been planted and worked on for years.